The Latin Monetary Union (LMU) was a 19th century attempt to unify several European currencies, at a time when most circulating coins were still made of gold and silver. It was established in 1865 and disbanded in 1927.
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By a convention dated 23 December 1865,[1] France, Belgium, Italy, and Switzerland formed the Latin Monetary Union and agreed to change their national currencies to a standard of 4.5 grams of silver or 0.290322 gram of gold (a ratio of 15.5 to 1) and make them freely interchangeable. The agreement came into force on 1 August 1866.[2] The four nations were joined by Spain and Greece in 1868, and Romania, Bulgaria, Venezuela, Serbia, San Marino in 1889. In 1904, the Danish West Indies were also placed on this standard but did not join the Union itself. When Albania emerged from the Ottoman Empire as an independent nation in 1912, coins of the Latin Monetary Union from France, Italy, Greece, and Austria-Hungary began to circulate in place of the Ottoman lira. Albania did not however mint its own coins, or issue its own paper money until it adopted an independent monetary system in 1925.[3]
The LMU served the function of facilitating trade between different countries by setting the standards by which gold and silver currency could be minted and exchanged. In this manner a French trader could accept Italian liras for his goods with confidence that it could be converted back to a comparable amount of francs.
With the tacit agreement of Napoleon III of France, Giacomo Cardinal Antonelli, the administrator of the Papal Treasury, embarked on an ambitious increase in silver coinage without the prescribed amount of metal.[4] The papal coins quickly became debased and excessively circulated in other union states, to the profit of the Holy See, but eventually Swiss and French banks rejected papal coins and the Papal States were ejected from the Union.[2]
By 1873, the decreasing value of silver made it profitable to mint silver in exchange for gold at the Union's standard rate of 15.5 to 1. Indeed, in all of 1871 and 1872 the French mint had received just 5,000,000 francs of silver for conversion to coin, but in 1873 alone received 154,000,000 francs. Fearing an influx of silver coinage, the member nations of the Union agreed in Paris on January 30, 1874, to limit the free conversion of silver temporarily. By 1878, with no recovery in the silver price in sight, minting of silver coinage was suspended absolutely.[5] From 1873 onwards, the Union was on a de facto gold standard.
The LMU eventually failed for a number of reasons. Some members, notably the Papal State's treasurer, Giacomo Cardinal Antonelli, began to debase their currency. This meant he minted coins with an inadequate amount of silver and then exchanged them for coins from other countries that had been minted correctly. More importantly, because new discoveries and better refining techniques increased the supply of silver, the fixed LMU exchange rate eventually overvalued silver relative to gold. German traders, in particular, were known to bring silver to LMU countries, have it minted into coinage, then exchange those for gold coins at the discounted exchange rate. These destabilizing tactics eventually forced the LMU to convert to a pure gold standard for its currency (in 1878). Greece was ejected from the union in 1908, for decreasing the amount of gold in their coins.
Even though the minting of new silver coinage ceased, the existing silver coins continued in circulation, and the fluctuations in the values of gold and silver were somewhat of a nuisance. The political turbulence of the early twentieth century which culminated in the First World War, brought the Latin Monetary Union to its final end in practice, even though it continued 'de jure' until 1927, when it came to a formal end.
The last coins made according to the standards of the Union were the Swiss fifty-centime, one-franc, and two-franc pieces of 1967.
Below are examples of coins of 5 units.
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